Clarifying Misconceptions About Donating By Cellular
I had some interesting back-and-forth discussions by e-mail this week about people donating money to charity using text messages. The inquiries involved various allegations about cellular carriers and what they were doing with donations given via text. Below are the questions we got, and the answers we were given by friends in the cellular industry.
- Question 1 – If I donate to charity X, and that money is passed to charity X by my wireless company, does the amount get bundled into one big donation by the cellular provider – who then gets to take a nice tax deduction with my money?
- Answer – No. The money is passed to the charity in your name, not the providers. There is no tax deduction earned by the provider based on your gift.
- Question 2 – Is it true that my cellular provider is keeping 50 cents of every dollar I contribute – so my $10 contribution becomes five dollars?
- Answer – No. 100% of the money you contribute goes to the charity. Your provider may charge a fee for sending the text message, however, in the case of Haiti relief, many providers are waving any such fees.
- Question 3 – I understand the phone companies hold on to my donation for quite some time after I make the donation. Is that true?
- Answer – No, but the answer to this one is a bit more involved. Cellular providers aren’t lending institutions like a credit card. Their system works on more of a pledge/fulfillment model. You indicate you want to send $50 to a charity. That $50 gets billed to your next statement. Once you pay that bill, the funds are released to the charity – so there will be a lag between when you make the pledge and when it is settled out of funds you submit to pay your bill.
- A special note about Haiti relief – Cellular companies, recognizing the importance of getting money to Haiti right away, have waived that process and are making transfers of funds immediately to assist with disaster relief in that country.
I hope that helps clear up any rumors floating around about giving via text message. Given the high profile this method of giving has received due to the Haiti earthquake, we felt it was important to help set the record straight.
If you have any other questions about donating via text message, or have heard any other rumors, please drop a note in the comments and we’ll try to get you an answer.
Great FAQ Michael!
Do these same rules apply if someone wants to use text messaging to contribute to a political campaign, or will cellular companies allow non-charitable donations in this way?
Let me double check on any rules that may apply to political campaigns.
My understanding from the people we’ve talked with is donations to political campaigns would be treated more like commercial transactions than charitable giving. Frankly that’s a definition the IRS seems to agree with in not allowing a tax deduction for political contributions.
So the terms of that agreement would likely look different and vary from carrier to carrier, and vendor to vendor.
From experience, I can tell you that is the case with credit card processing as well. Bank rates and transaction fees vary, as do rates charged by web vendors. With web vendors, I have seen rates as low as 4% charged for credit card services up to as high as 15% – and that is often on top of the fees charged by the banks.
This is an area where campaigns may want to shop around more before selecting a vendor, bargain to get the best rate, and disclose to potential donors what the rates are before they make a donation.
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